To make up for a $600 million shortfall in the MassHealth budget for 2018, Governor Baker has proposed four Massachusetts insurance market reforms, one of which would bring back a fair share contribution requirement for employers with 11 or more full-time equivalent employees (FTEs). Before the Affordable Care Act (ACA) was signed into law, the Massachusetts Health Care Reform law required an employer to pay $295 per full-time employee unless the employer met certain coverage offer requirements. However, the requirement was repealed in 2013 to align with the Affordable Care Act’s employer mandate and other requirements taking effect in 2014.

Under Governor Baker’s proposal, the employer contribution would be $2,000 per FTE not covered by the employer’s plan, unless the employer provided “adequate coverage” and at least 80 percent of its FTEs were enrolled in the employer’s plan. If passed as proposed, the effective date would be the first day of the plan year beginning on or after January 1, 2018.

Adequate coverage is defined as $4,950 for full-time employees (i.e., 35 hours per week) for employer health coverage or a contribution to an HRA ($4,950 or another amount determined by the Massachusetts Department of Revenue). There is no additional requirement for spouses and dependents.

FTEs would equal the total number of employee hours of work performed by employees with one at least one month of service per quarter divided by 500, with a maximum of 500 hours counted per employee. When determining FTEs and an employer’s fair share contribution, temporary and seasonal employees and interns would be excluded. However, employees under age 26 who opt for coverage under a parent’s employer’s plan would be included. The formula for determining FTEs was designed to not incent employers to shift more full-time employees to part-time. If an Affordable Care Act (ACA) mandate applies, an employer would be credited for any federal penalties it pays before being assessed for the state employer contribution.

The table that follows shows how the employer contribution would be calculated assuming each employer has 20 FTEs comprised of 18 full-time employees and 4 part-time employees.

In addition to the fair share contribution, Governor Baker has also proposed the following to close the MassHealth budget gap:

  • Caps on certain health care provider rate increases, the elimination of certain facility fees charged for services, a moratorium on new health insurance coverage mandates, and the ability for small businesses to offer employees a choice among a range of insurance through a new Connector small business platform (In general, the effective date would be July 1, 2018, except for the new
  • Connector small business platform, which would be effective January 1, 2018.)
  • Submitting a waiver for relief from ACA employer mandate to simplify health care administration burden for employers
  • Continued controls for the sustainability and program integrity of MassHealth

Governor Baker’s proposal is causing a great deal of concern among some businesses. The Associated Industries of Massachusetts opposes the reinstatement of the fair share contribution, stating on its website that the “proposal to impose a $2,000-per-employee tax on some employers is an unfair way to close a deficit in MassHealth.” There are also many questions on how the $2,000 fair share contribution would actually work. We understand that the Governor is open to considering other options that would close the MassHealth gap.

The information provided on Governor Baker’s proposal is from the Masschusetts Insurance Market Reform, Affordability and MassHealth Sustainability document prepared by the Executive Office of Health & Human Services, January 26, 2017. To access the full text, visit

Your PS&A team will keep you informed of any new developments regarding the proposal.